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The government’s planned industrial revitalization body would be able to get national financial institutions to forgive debts when salvaging heavily indebted companies, according to a bill unveiled Wednesday.

The bill to set up the government-backed entity also stipulates that the government would assume the responsibility of covering losses of the body with public funds if any remain at the time the body is dissolved in five years or so.

Liberal Democratic Party lawmakers gave a nod to the bill in a meeting Wednesday morning.

The government is expected to formalize the bill by Tuesday for submission to the Diet during the current session, with the aim of launching the corporation as early as May.

The new body would have the basic task of buying problem loans from nonmajor creditor banks to help revive debt-saddled firms it deems to be viable and lead to rebuilding Japan’s corporate sector.

But the government also indicated the entity may also buy problem loans from major creditors in the event that indebted companies come up with feasible rehabilitation plans with their nonmajor creditors.

According to the bill, the industrial revival committee, an in-house panel to actually decide on loan purchases, would consist of three to seven members, including a president and outside directors. They would be tasked with electing a chairman.

In making a decision on whether to help certain debtor companies, the entity would hear opinions from ministers in charge of industries as well as the prime minister, finance minister and industry minister, who would jointly oversee the body.

It would then press banks to swiftly take advantage of the mechanism. If creditor banks do not agree to sell loans within three months, the government-backed body would cancel plans to help the indebted firms.

In helping firms, it would provide such financial support as additional loans, debt-for-equity swaps and debt waivers, with the goal of selling off its loans to the firms within three years to avoid freezing nonperforming loans at the body.

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